According to the United Nations, 10 of the worlds 19 unequal countries are situated in sub-Saharan Africa. Interestingly, South Africa (i.e. the most developed country on the continent) is the world's most unequal, whereby the majority live in poverty and the minority accumulate a large amount of wealth. On top of this, although the economic pace of sub-Saharan Africa has grown in the past decade, the percentage of people living in extreme poverty has not declined as rapidly as expected and high levels of economic inequalities still persist in the region. With that said, what are the reasons for these high inequalities and how can Africa transition into a prosperous economy?
In this episode of ExpertsConnect, Senior Policy Fellow at the Center for Global Development and former Minister of Public Works in Liberia, Mr W. Gyude Moore, MSc., initially discusses how Africa's colonial past affected its economic prosperity. Later, Mr Moore dives deeper into the causes for the high inequalities in Africa and shares his perspective on how prosperity can be achieved on the continent. Mr Moore also discussed China's role in the development of Africa's infrastructure. Finally, he shares his views on the role of Africa's Sixth Region - the Diaspora.
How has Africa's colonial past affected its economic prosperity? [1:55] | Mr Moore mentions the following. There was actually a paper a couple of months ago that systematically observes this question and tries to interrogate it. First, it shows the idea of sort of path dependence, social processes, academic processes become path-dependent. So if this is the path is sort of like a river, it flows in the path of least resistance, and it simply continues to flow in that path. So the patterns that were established were basically, most of Africa that was colonised was a source of natural resources of raw materials, to support jobs and factory and value creation in colonial power. So basically, most of Africa was at the periphery. When independence occurred, in most African countries, even though people wanted to be independent, they were in no position to run independent states. They didn't have as many educated people, they didn't have as many people to fill technical positions. And so the patterns of trade that were inherited, from the colonial era remained, which is basically just continuing to export a natural resource. And so between then, and now, there are countries that are trying to make it but we still haven't had a critical mass of transitioning to industrialization.
What are the reasons for the high economic inequality in Africa?? [3:39] | Mr Moore shares the following. So I keep coming back to this to basically what happened over time was the richest countries in the world industrialised countries went through sort of these phases of heavy industrialization, where most of the jobs work from manufacturing, and then transition into knowledge economies and service economies. But every time a country or a group of countries make that transition, another group of countries come up in their place and then begin the process again. I mean, in my view in most African countries when the Wars of the 1990s ended, and after African countries were basically about to make that transition, they ran into a huge Roadblock, and that roadblock was China. China was a massive country, basically a continent-sized country. China had the infrastructure, China had a skilled labour force. Also, China had sort of the conglomeration effect - because if you build a factory here that is manufacturing for example, textile jeans, then adjacent to that factory, you have one that produces zippers. So it's easier to build a factory in China because these components and subcontractors are so close to each other. So China in 2000, had all of these things, whereas, in Africa, you have the same, a larger space, maybe the same number of people, but separated over 54 or 55 different countries, with different regulatory environments. And so China was way more attractive as a destination for FDI to build manufacturing than, say, Africa. . So China now is getting to that place where it's beginning to focus more on a knowledge economy or high tech products. And then the next group of countries will think like, oh, maybe it's Africa turn, but not really, now it looks like it's going to Vietnam and Laos and Cambodia, whereas Africa continues to lag behind. So as long as Africa continues to export agriculture and mineral products to the world without adding value, then the inequality persists. Right? So again, we have to disrupt the patterns of trade are established by the colonial relationship.
What does prosperity look like for Africa? [6:27] | Mr Moore states the following. So I have this thing. I'm trying to make it a thing that I call the Africa project. And the Africa project is, in my view, an accumulation of all of our efforts to build a prosperous African society. And what does that mean, a prosperous African society is one in which we can culturally, socially, and economically thrive, where millions of young Africans are not forced to leave their homeland as a means of being able to find some sort of economic or, cultural fulfilment, elsewhere. We have a think about it. They're young people in Africa today, who would discount the risk of walking across the Sahara Desert, of going through Libya, of trying to cross the Mediterranean in a leaky boat that is not even seaworthy, hundreds of people have gone before you who died. And they see there's more promise in doing that than remaining at home. We want Africans to be able to travel anywhere they want, we want Africans to be able to share their talents with the world. But we want a continent where that outgoing is not driven by insecurity, by war, poverty, is driven by the pursuit of a just the same way Europeans, you know, go out into the world, it's not because they're starving and dying from wars, right? It's that that's the kind of thing we're looking for. So we're looking for a cognitive feat itself. We're looking for a continent that trades with itself. So the significant amount of trade is between African countries and among African economies, we're looking for a continent that is able to provide the most basic standards of living for its people and every decade, we see an increase in the quality of life of the African person that in my view, is what a prosperous Africa looks like to me.
How can digital technology improve Africa's prosperity? [10:47] | Mr Moore states the following. Well, one of the things that I and I, really hesitate to say this because, you know, people have been using it for a long time and it's become almost an epithet, it is this leapfrogging, to a certain extent, it's useful and it makes sense. But there are certain basic infrastructures, you can't leapfrog. But there's no question that technology has helped. So for example, one of the issues we have is just we operate in a low trust environment. And it's almost impossible to build complex and a complex economic system without trust. And so, here in the West, for example, you have institutions of trust, I may not trust you, you may not trust me, but we both trust the bank. Okay. So if, if I, if you give me a check, I simply have to submit that check to the bank, and the bank is gonna come back and tell me whether you have money in that account or not. Right. So if the digital system sort of helps to do that, it helps to create trust, where trust probably wouldn't be the second thing is also that it provides a market that is the problem wouldn't exist, right? A lot of young people in Africa now are faced with unemployment, have been able to sell and buy goods and services on say, Instagram marketplace, Facebook marketplace, and they're selling and buying from people who may live on the other side of town, and there's absolutely no way they would have known each other if the platform didn't exist for them to be able to do that. So that helps. The second thing is, as more and more people get online, I mean, one of the things that have become pretty profitable, is creating content, creating material that people want to consume, and you have very talented Africans, who all of a sudden can create a YouTube channel and actually earn money from a YouTube channel. Or you can we could do something that the Indians have done, where, there was a time where you called into a US firm as you call into customer service, and someone in India was answering your questions, right. So you have tech firms that might hire people in Africa to do work for them here on this site. And the only reason that's possible is a digital platform allows them to do so digital transfer the transition to a digital economy, or hybrid economy between the digital and physical, tangible, carry significant promise for Africa's economic prosperity.
What instigated the Chinese-African Engagement? [13:44] | Mr Moore explicates - Yeah, I'm one of the people who have argued for your continued Chinese investment in African infrastructure. One of the things you would notice about some of the projects that China have financed in Africa, infrastructure projects, and this isn't just limited to Africa, not all places that these are projects where African governments those governments have struggled to raise financing for where they may have taken it to the World Bank or taken it to bilateral lenders and told them that war is not commercially viable or it doesn't make sense. So China has come in and provided that. The second thing is that we have to historically look back at why China was such an attractive partner, and how China came to be. So by 1989, you know, the Berlin Wall falls, and the cold war ends. Well, throughout the Cold War, Western interest in Africa and other places in the developed world, was because they were in this ideological battle with the Soviet Union. So you support whoever was on your side. And when that war ends, when the cold war ends, there is really no value to continuing to maintain client states. And so the West withdraws. And when it does, and no longer provides support for the strong men, there was a significant amount of turmoil occurring within African countries. So there are lots of coup d'etat. There were a significant amount of wars and civil wars throughout the 1990s. And eventually, while that was occurring at the same time, HIV AIDS was spreading across the continent, right. So with the wars and social and civil unrest, you have large numbers of people moving across borders of refugees and internally displaced. And in the West, Africa was largely seen through the lenses of development, it was seen as a place of risk, it was seen as a place where the engagement was largely to contain the risks. And one of the issues of the risk of force comes in 1998, with the embassy bombing in Tanzania and Kenya, and when they appeared, you know, that global terrorism was reaching out into Africa. And so Africa, then, beyond simply being in a place of development, was seen as a place of possible risk. And so the security lenses were applied to Africa. So in these times, this is going on, there is not an incentive in the West to say, let's build infrastructure in Africa, let's invest in African economies, right, most of what is done is let's provide development assistance to Africa. And then so China at this time is also coming up, China joined the WTO, in 2001. So everywhere else in the world, the Chinese are just not good enough to compete in those markets, because they can't compete with the Americans, the Europeans or the Japanese. And the one place where China is not facing any rivalry in terms of being able to compete. Of course, it's in Africa, because most people aren't paying attention to Africa in that way. And so, Africa's greatest need turned out to be China's greatest strength at the time, which is basically infrastructure. And so this marriage was like it was made in heaven, right between the Chinese and Africans. The final thing about that is that China didn't really care about the model of governance, whether you were respecting human rights, what are you doing that China was willing to give loans to everybody? democratic countries, autocratic countries.
Whereas, Western engagement was like, are you having free and fair elections, or democratic rights being provided? Is your public financial management good, is the high corruption there, we can't deal with you. China didn't care. Right. And so for a lot of African countries that are not very democratic at the time, the Chinese ended up again, on this level to be really, really good. So we see over the last 20 years, the significant ramp-up of Chinese investment, and most of it more than at least 46%, maybe somewhere between 46 and 52%, of Chinese lending, went to infrastructure. And that is what you need. If you're going to build an economy, you need roads, you need power. You know, even if you go into agriculture, you need storage. And as storage, you have to control moisture and temperature that requires power to do that. If you have big farms, you need to be able to get the products from the farms to the market, you need roads and transport links to be able to do that. Well, if you're going to protect people's lives, you have to provide clean water for people to be able to drink and water filtration. Right? If Africa is going to be connected to the rest of the world, and Africa needs ports and the Chinese invested in all of these things. And so you can see how if you're an African you may value the relationship you have with the West. But if they're not providing what your people need, then, of course, you turn to a partner who does to find the thing that I would say is and I've said this again, and again that it might seem sort of ironic to people or counter-intuitive.
What's your perspective on the loans that Africa Amasses from China? [24:18] | Mr Moore mentions the following. that is a problem in Africa. But that is not uniquely a Chinese problem in Africa. There are about seven or eight countries in Africa that are heavily indebted to China, we have 54 countries on the continent 55 if you count Western Sahara, so seven out of 54. So when we talk about Africa's debt to China, we're talking Angola, Kenya, Ethiopia, Djibouti. Dan. And I think one of the Congos, you know, and so we're not talking Nigeria, we're not talking South Africa. So again, the larger group of creditors to Africa, private creditors, you know, African countries that are taking loans, issuing euro bonds. So we're talking about Western wealth managers who invest in Africa loan products, African sovereign loan products, right. And then you have the multilateral, your World Bank, African Development Bank, right, who are also lending in large quantities to African governments, it is a combination of all of this borrowing that leaves Africans with debt. So I think it's important to us to continue to speak about the debt issue and the sustainability of the debt we take. Because the problem is, and this is what's beginning to happen in a place like Kenya, where debt servicing costs now has gone up to $11 billion. If you're spending almost all of the revenue you're collecting simply service in debt, then there's no money left to invest in health and education in anything else because you're just doing that. And that no country wants to live like that. So the debt question is definitely want to talk about, I still want to talk about it in isolation, as if it is a uniquely Chinese problem. It is not.
To address the debt problem, the best place would be the private sector. Right, because the private sector has a significant amount of money, some private sector, wealth managers, have a longer time horizon over which they can deploy their capital. But there is there are two problems facing Africa when it comes to this. One is that globally, investment infrastructure is a proportion of the portfolio of wealth and wealth managers, infrastructure is not very big. And because infrastructure isn't so big, infrastructure is sort of isn't fully developed as an asset class. What do I mean? It means like, almost every infrastructure project is bespoke, you have to start from scratch, you have to do everything, there are no templates, right? If you wanted to buy a stock today, you can just go and buy a stock. Like it's easy to invest in a stock. But if you wanted to invest in infrastructure today, it doesn't exist like that, even in the West. So that's the first problem. The second problem is a heightened perception of risk in Africa, Africa is seen as inherently riskier. And so if Africa is perceived as so risky, then private capital is hesitant to deploy in a market that is so risky. And so if we can reduce the perception of risk in Africa, it is possible that we might increase the volume of private money that is going into African infrastructure. So some of the things that I think about and write about is how can we reduce the perception of risk?
How can Africa benefit from the Diaspora? [33:27 | Mr Moore mentions the following. So first, you know, is north, south, east, west and Central Africa, those are the five regions in Africa, and the African Union has spoken about Africans who it doesn't matter when they left the continent, those who are forced of the continent through slavery, those who, who voluntarily immigrated of the continent, they are diaspora, or just people of African descent, regardless of where they are, from Brazil, to the Caribbean, to India, wherever you will find people of African descent, there is this idea that they are connected to the continent, and we are connected because of our common history. So Ghana tried to take advantage of this in 2019 because 2019 was 400 years since the first slaves left. And so it was called the year of return. And there were black people and people of African descent from all over the world who came to Ghana. What Ghana did in that year, is basically what we're trying to do forever, right, is the idea that you know, regardless of where a person might be, as long as this person has African roots, that their talents, their skills, their capital, their expertise will be useful and needed on the continent. And we can find a way for us to be able to do that back to benefit. But one of the first benefits of this is, like I said, from the beginning when most African countries became independent, they didn't have the skilled workforce to be able to build a modern state. And today, human capital remains an issue in Africa, right. So if we can have Africans who are in the diaspora skilled, who can come to Africa and be able to provide the skills. Absolutely, that helps us move better. The second thing capital, so I'm from Liberia, if I became wealthy, here in the United States, I understand the Liberian context in a way that someone else may not. If I returned to Liberia and invested there, it means I am taking capital from here, and investing in Africa. Or you know, someone in Jamaica, who makes money in Jamaica and decides to open up a new business in Ghana or Kenya. And so now, he brings both his capital in terms of money, but also in terms of his expertise from the business he has in Jamaica and starts the exact same business in Kenya or in Ghana, all of a sudden, the market is new. Now he's on a continent of 54. countries, he can open in Botswana, he can open and as his business grows, just that's it. So you might have a Swedish citizen or German citizen, who happens to be you know, his parents are great grandparents came from a random Antiga. Right? In Sweden, and he has this really incredible scale, he has a startup, where he believes that his startup would do really, really well in Rwanda, they're trying to have something called innovation city, and Rwanda is trying to push itself as a tech space. So he goes to Rwanda with his company and creates value on that company. And so then when we think of the Diaspora as the sixth region, it is this idea that everyone who has some sort of connection to the continent is welcome to the continent, they can bring their global networks, they can bring their global skills or global expertise to help to build this prosperous Africa that we spoke from the beginning.
How can the Caribbean benefit from a partnership with Africa? [36:59] | Mr Moore highlights the following. The Caribbean isn't growing, in terms of its population, in fact, the population decline is a serious problem for the Caribbean, for a number of reasons. One is a high, a lot of the young people from the Caribbean, and up in Canada, or in Europe, or the United States, they leave, right. And so then, and obviously, they do everything they can to send money back home, they go and visit back home, but they've built lives for themselves outside of the Caribbean. At some point for the Caribbean society to remain viable, you need citizens, you need people to be able to do that. Well, where else in the world are people going to come from who want to move to the Caribbean and have children (not move to the Caribbean to retire)… but… young people who are going to move to the Caribbean and have families outside of Africa? What logically, of all the places in the world population is actually stabilised or is declining, the one place where the population is actually still growing, it's Africa. So if I were thinking long term, 20 years, 30 years about the future of most Caribbean countries, that it makes sense to me to begin to improve my relationship with African countries, right? It is the idea that I want to encourage people from African countries who want to come to the Caribbean encourage people from the Caribbean who want to go to African countries because, in the future, the very viability of Caribbean countries is going to depend on population. And this is so I think, in terms of the importance to the Caribbean, because without population, you face an existential threat. Will Jamaica continue to exist while Jamaica probably will, but the smaller ones, right? You know, if they lose if they continue to lose their population? The final thing I would say on that question is like even in the Caribbean countries where the young people don't leave, the more the women get into the economy and start working and get more opportunities and begin to focus on careers. They're going to delay having children or not even have children at all because now they have opportunities. So I think that's one of the things. The final thing that I will say also is that, look, if there is a Nigerian or Ghanian, who, you know, has done business in Nigeria and Ghana for a while sort of feels like, you know, the space isn't what I would like it to be, you know, I want to be able to invest elsewhere. Well, maybe you could invest in a Caribbean country, right in terms of being able to do that. So I think the exchange between Africa and the Caribbean would make a lot of sense. A lot of the Caribbean countries have done really, really well in terms of developing tourism. And they can work with African governments to be able to help them develop the tourism industry to make them attractive for people to come there. Most especially they could come with their private tour companies and be able to establish just businesses there. So I definitely think that it is in the interest of both Caribbean countries and Africa to increase the extent of the exchange and back and forth movement between the two places.
Notable Quotes from W. Gyude Moore
"[…] a prosperous African society is one in which we can culturally, socially, and economically thrive, where millions of young Africans are not forced to leave their homeland as a means of being able to find some sort of economic or, cultural fulfilment, elsewhere." [6:53]
“They're young people in Africa today, who would discount the risk of walking across the Sahara Desert, of going through Libya, of trying to cross the Mediterranean in a leaky boat that is not even seaworthy, hundreds of people have gone before you who died. And they see there's more promise in doing that than remaining at home..” [7:18]
“[…] one of the issues we have is just we operate in a low trust environment. And it's almost impossible to build complex and a complex economic system without trust.” [11:25]
“So if you're trying to attract the private sector into your country, this idea that laws are capricious, that they're arbitrary, and people can just change them anytime they want, it creates this perception, it sorts of inflames the perception of Africa being a very risky place to invest.” [32:42]
“[…] I definitely think that it is in the interest of both Caribbean countries and Africa to increase the extent of the exchange and back and forth movement between the two places.” [40:24]
“The most important lesson that I learned was that leadership matters.” [40:53]
“Trend does not equal destiny." [50:01]
CONNECT with W. Gyude Moore
If you have been empowered by the information shared on this podcast, then please clap using the clap emoticon. Please feel free to ask any questions or to share your comments using the comment emoticon.